African nations fare poorly in business rankings by Andrew Balls

Tuesday, September 13, 2005

Poor African countries impose far more obstacles to setting up and operating businesses and creating jobs than any other part of the world, the World Bank said on Monday.

For the first time, the bank?s Doing Business report provided an overall ranking for the ease of conducting business in its 155 countries, at the behest of Paul Wolfowitz, who took over as bank president in June. In the past it has only listed the top performers, partly to avoid offending those at the bottom.

African countries dominated the lower ranks, with Sudan, Chad, the Central African Republic, Burkina Faso and Congo in the bottom five places. The top five countries in the ranking were New Zealand, Singapore, the US, Canada and Norway.

The rankings are based on the time, cost and minimum capital requirement for starting a business; the difficulty of hiring and firing workers; the burden of corporate taxation and the tax regime; the complexity and cost involved in getting licences and registering property; access to credit; investor protection; and the burden of regulation on cross-border trade.

The report showed that better business climates led to stronger job growth. In developing countries, better business indicators also led to growth in the formal sector of the economy and a decline in the share of informal activity.

?Where regulations are costly and burdensome, businesses often operate in the informal economy – and remain small, creating few jobs,? the report said.

The data, from 2004, show that 99 countries – two-thirds of the total – have introduced reforms that make it easier to do business. Serbia and Montenegro was the leading reformer, followed by Georgia. Overall, eastern Europe and central Asia had the best record in terms of improving the business climate.

By region, Africa places the greatest regulatory burden on starting and operating businesses and creating jobs, and Africa has also achieved the least reform in these areas.The report noted that Rwanda was an exception, being placed among the top reforming countries, although still in 139th place overall.

The Nordic countries all rank in the top 15. Among the large emerging countries, China, ranked 91st, has the best business environment, while Indonesia (115th), India (116th) and Brazil (119th) ranked poorly.